Virgin, Air NZ may eye island routes

Matt O'sullivan

AIR New Zealand will consider extending its trans-Tasman alliance with Virgin Australia to include the Pacific Islands when it reapplies to regulators late this year for a continuation of the existing deal.

Declaring the Kiwi airline in ''growth mode'' after a solid first-half profit, the new chief executive, Christopher Luxon, said extending the alliance was something the two airlines could consider because they both had ''good Pacific Island businesses''.

''I'm not sure at this stage - that is something we are continuing to discuss,'' he said.

In 2010, the airlines considered including the Pacific Islands in their alliance but decided against it because the regulatory hurdles appeared too high.

A number of routes to the islands would become monopolies if the two airlines were allowed to broaden their alliance in the region.

Mr Luxon said the outlook was positive on the trans-Tasman route, while the airline was ''equally excited about opportunities within the broader Pacific Rim region'', including Asia and the Americas.

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The delivery of two more leased wide-body Boeing 777s next year, in addition to the first of its 787-9 Dreamliners, will allow Air New Zealand to consider flying to new destinations within the Asia-Pacific.

Despite the woes besetting the Dreamliner program, Mr Luxon said he was confident Boeing would be able to resolve the problems and begin delivering the first of the airline's eight planes on order from mid-2014.

Mr Luxon said the alliance with Virgin, in which it had a 19.99 per cent stake, and the introduction of four fare types, had allowed Air New Zealand to turn around its performance on the Tasman in recent years.

Shares in Air Zealand rose 5 per cent after it posted a net profit of $NZ100 million ($A80.7 million) for the six months to December, up from $NZ38 million previously.

It will pay an interim dividend of NZ3¢ a share on March 22, up from NZ2¢ previously. The airline expects its pre-tax earnings in the second half of this financial year to ''comfortably exceed'' those in the same period in 2011-12.